Mortgage Delays Are Biggest Reason For Bridging Loan Requests
According to the Bridging Trends report published for the first quarter of 2018, the biggest reason why people request a bridging loan is because they have encountered a delay in processing their mortgage application thus leading to a request for short-term finance. 24% of applications for bridging finance were for this purpose compared to 28% in Q4 of 2017.
The second most popular reason for requesting bridging finance was for an auction purchase with 20% of requests being for this purpose. This was higher than in the previous quarter when 15% of applications were for this reason. 18% of requests were for refurbishment purposes – down from 20% in Q4 of 2017. 16% were for business purposes – up from 14% in the previous quarter. 14% of requests were for re-bridging – down from 17% when compared with the previous quarter. 8% were for other purposes – up from 6% in Q4 of 2017.
Total gross lending rose from £122.49 million in Q4 of 2017 to £154.02m in Q1 of 2018 – an increase of £31.53 million. It will be interesting to see what happens in the current quarter.
The average monthly interest rate remained at 0.83% with this appearing to be a competitive rate of interest.
The average term of a bridging loan dropped from 12 months in the last quarter of 2017 to 11 months in the first quarter of 2018. This does seem a long period of time for a bridging loan to be in place.
The average loan to valuation increased from 45% in Q4 of 2017 to 49.1% in the first quarter of 2018. Lenders will be pleased with this as it reduces their exposure to risk of loss.
The average time to complete on a bridging loan application rose from 40 days in Q4 of 2017 to 48 days in the first quarter of this year. This is a disappointing statistic.
In Q1 of 2018, in 83.7% of applications, the lender took a first charge and in 16.3% of cases the lender took a second charge. In the last quarter of 2017 the comparative figures were 80.3% and 19.7%.
The Bridging Trends report is produced from figures provided by mtf, Brightstar, Enness, Positive Lending and SPF Short Term Finance. We will continue to provide updates about bridging finance periodically as and when they become available.